Banks’ Dollar Funding Costs Hold Near Three-Week High in Europe

The cost for European banks to borrow in dollars held near the highest level in more than three weeks, according to a money-markets indicator.

The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was little changed at 27 basis points below the euro interbank offered rate at 8:20 a.m. in London, the most expensive since Sept. 5, according to data compiled by Bloomberg. The cost has increased from minus 17 on Sept. 14, the cheapest since June 2011.

The one-year basis swap was unchanged at 27 basis points, or 0.27 percentage point, below Euribor.

A measure of European banks’ reluctance to make unsecured loans to one another held near the lowest since August 2007. The difference between Euribor and overnight index swaps, known as the Euribor-OIS spread, was little changed at 13.5 basis points.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at a record low 0.087 percent yesterday from 0.095 the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was unchanged at 8.4 basis points.

Lenders increased overnight deposits at the European Central Bank yesterday, placing 297 billion euros ($383 billion) with the Frankfurt-based central bank from 295 billion euros the day before.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.